Asymmetry of Exchange Rate Pass-through to Consumer Price Index: A Case Study of Thailand
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Abstract
The objective of this study was to determine whether the relationship between exchange rate pass-through (ERPT) and consumer price index (CPI) was symmetrical. In this study, the real exchange rate index was used to represent the exchange rate, and the independent variables used in this study consisted of the output gap, money supply, and oil and gold prices. The data used in the study were monthly data from 2000 to 2021. Non-Linear Autoregressive Distributed Lag Model (NARDL) method is employed for the estimation. The results demonstrated that the exchange rate pass-through CPI over the long-run was asymmetrical (long-run asymmetry) and it was the incomplete pass-through significantly at the .01 level, and indicated that the change of product price was incomplete adjustment or price stickiness. In addition, it was found that the oil price was the factor that significantly affected the changing of consumer price index in the long term at the .01 level, so when oil prices changes, it cause the changing of the consumer price index likewise. Therefore, the affiliation can use the results as a guideline for planning about price index changing.
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References
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